By Kevin E. Noonan ––
The pitfalls attendant on collaborations between
industry and academia are nicely illustrated in the Federal Circuit's decision
last week in Board of Trustees of the
Leland Stanford Junior University v. Roche Molecular Systems, Inc.
Stanford asserted three patents relating to methods
for using polymerase chain reaction (PCR) detection of human immunodeficiency
virus (HIV) RNA in blood samples for assessing the efficacy of antiretroviral
drug treatment. These patents
were:
U.S. Patent No. 5,968,730 (Merigan, Katzenstein and
Holodniy, inventors), issued on October 19, 1999:
1. A method of
evaluating the effectiveness of anti-HIV therapy of a patient comprising:
(i) collecting a plasma
sample from an HIV-infected patient who is being treated with an antiretroviral
agent;
(ii) amplifying the
HIV-encoding nucleic acid in the plasma sample using HIV primers in about 30
cycles of PCR; and
(iii) testing for the
presence of HIV-encoding nucleic acid, in the product of the PCR;
in which the absence of
detectable HIV-encoding nucleic acid correlates positively with the conclusion
that the antiretroviral agent is therapeutically effective.
U.S. Patent No. 6,503,705 (Kozal, Merigan,
Katzenstein and Holodniy, inventors), issued on January 7, 2003:
1. A method of
evaluating the effectiveness of anti-HIV therapy of an HIV-infected patient
comprising: a) collecting statistically significant data useful for determining
whether or not a decline in plasma HIV RNA copy numbers exists after initiating
treatment of an HIV-infected patient with an antiretroviral agent by: (i)
collecting more than one plasma sample from the HIV-infected patient at time
intervals sufficient to ascertain the existence of a statistically significant
decline in plasma HIV RNA copy numbers; (ii) amplifying the HIV-encoding
nucleic acid in the plasma samples using HIV primers via PCR for about 30
cycles; (iii) measuring HIV RNA copy numbers using the products of the PCR of
step (ii); (iv) comparing the HIV RNA copy numbers in the plasma samples
collected during the treatment; and b) evaluating whether a statistically
significant decline in plasma HIV RNA copy numbers exists in evaluating the
effectiveness of anti-HIV therapy of a patient.
And U.S. Patent No. 7,129,041 (Merigan, Katzenstein
and Holodniy, inventors), issued on October 31, 2006:
1. A method of
evaluating the effectiveness of anti-HIV therapy of a patient comprising: correlating the presence or absence of detectable HIV-encoding nucleic acid in
a plasma sample of an HIV infected patient with an absolute CD4 count, wherein
the presence or absence of said detectable HIV-encoding nucleic acid is
determined by (i) collecting a plasma samples from an HIV-infected patient who
is being treated with an antiretroviral agent; (ii) amplifying HIV-encoding
nucleic acid that may be present in the plasma sample using HIV primers via PCR
and; (iii) testing for the presence of HIV-encoding nucleic acid sequence in
the product of the PCR.
All three patents were assigned to Stanford
University.
The background facts recited in the Federal Circuit's
opinion relate to co-development in the late 1980's and early 1990's of the application
of PCR technology to HIV detection by Stanford and Cetus, a private company
that developed and owned the PCR technology. These collaborations were governed by a series of written
agreements between the company and the University.
In 1988, Inventor Holodniy signed a "Copyright
and Patent Assignment (CPA)" agreement as a condition for his employment
as a post-doctoral researcher in Inventor Merigan's laboratory governing
ownership of any inventions he developed. However, in 1989 he began a series of "regular visits" to Cetus
to learn the PCR technique. The company imposed as a requirement that he sign a "Visitor's Confidentiality
Agreement (VCA)" with Cetus that purported to assign his rights to any "ideas,
inventions and improvements" made by him "as a consequence of"
the work he performed at Cetus.
Complicating matters, Stanford and Cetus signed
several "Materials Transfer Agreements" permitting Stanford to use
PCR-related reagents and information supplied by Cetus during the performance
of the work that culminated in the patents-in-suit. In return, Cetus received licenses to the technology
developed by the Stanford researchers using the materials supplied by Cetus.
The Stanford Technology Transfer Office and Roche
(Cetus' successor-in-interest to agreements between Stanford and Cetus and the
PCR technology) began negotiations regarding a license to the patents, but the
University sued when Roche refused to agree to a license. Stanford sued Roche
for infringement based on Roche's sale of kits for PCR detection of HIV RNA for
assessing the efficacy of antiretroviral therapy. Roche raised its purported ownership rights as well as "shop
rights" to the claimed invention as affirmative defenses, as a declaratory
judgment counterclaim, and procedurally regarding Stanford's standing to bring
the lawsuit.
The District Court ruled on summary judgment that
Roche's assertion of ownership rights were properly viewed as a counterclaim
subject to and barred by the California statute of limitations (which had
expired before Roche raised the counterclaim). The Court also ruled that Roche did not have a license to
the technology because it failed to obtain consent from the patent holder,
Stanford, and that Roche did not have shop rights in the invention. The District Court granted Roche's summary
judgment motion that the asserted claims of all three patents were invalid for
obviousness.
The Federal Circuit issued a decision vacating
the District Court's determinations in a decision by Judge Linn, joined by
Judges Prost and Moore. The Federal Circuit
affirmed the District Court's determination that Roche's ownership claims were
barred by the California statute of limitations. But the CAFC vacated the remainder of the District Court's
decision, based on its conclusion that Stanford did not have standing to sue.
The Federal Circuit first dismissed Stanford's objections to
Roche's defenses and counterclaims on procedural grounds, finding critically
that Roche had raised a question of standing that could properly be raised at
any time during a litigation and that was not foreclosed by statutes of
limitations. Thus, the CAFC
considered it error for the District Court to have refused to consider Roche's
ownership counterclaims below. Instead of returning the matter to the District Court, however, the Federal
Circuit decided the question (in Roche's favor) in its opinion.
In its decision, the panel went right to the heart
of the matter: that Inventor
Holodniy had made agreements to assign his rights to multiple parties. Here, however, the Court made an
important distinction based on the language of the CPA Inventor Holodniy signed
with Stanford. The agreement
stated that Inventor Holodniy "agrees to assign" all inventions that
he first "conceives or first actually reduces to practice" under the
research grants to the University. The Court held that this was not "an immediate transfer of
expectant interests" (i.e., a present assignment of future inventions),
but "a mere promise to assign rights in the future"; the Court's conclusions were bolstered
by further portions of the CPA that required Inventor Holodniy to assign his
rights "at an undetermined [future] time." Thus, the panel held that Inventor Holodniy retained rights
in his invention at the time he made the further agreement with Cetus; if the Court had ruled otherwise, then
Inventor Holodniy would have transferred all his rights to the University prior
to signing the agreement with Cetus, and would have had no rights to assign.
In contrast, the VCA Inventor Holodniy signed with
Cetus contained the language required by the Federal Circuit to effect an
immediate transfer of rights: "I
will assign and do hereby assign to CETUS, my right, title and interest
in each of these ideas, inventions and improvements" (emphasis in
original). With the
filing of patent applications naming Inventor Holodniy as an inventor, the Court said, equitable title conferred upon Cetus by Inventor Holodniy's VCA
converted "by operation of law" to legal title in the "ideas,
inventions and improvements" disclosed in the patent applications that
issued ultimately as the patents-in-suit. This negated Inventor Holodniy's subsequent assignment of his rights to
these inventions to Stanford, because he no longer had any legal rights to
assign (Stanford's rights to the patents presumably derive from the interests
of the other named inventors).
The Federal Circuit also refuted Stanford's
assertion that Holodniy's later assignment placed them in the position of a "bona
fide purchaser for value" with regarding to Cetus' (now Roche's)
interests in the patents. The Court found that Stanford had at least constructive notice of Cetus'
interests, if only as the result of the terms of several Materials Transfer
Agreements between the University and the company. In addition, the Court relied upon common-law agency
principles that attribute knowledge to the employer possessed by the
employee. (Interestingly, the Court ignored any agency relationship between Inventor Holodniy and the
University with regard to failure of the inventor to obtain Stanford's
permission or consent to assign his rights to Cetus, since (according to the Court)
"Holodniy signed away his individual rights as an inventor, not
Stanford's, while performing work for Stanford after promising to assign his
rights to the university" (emphasis in original).)
Finally, the Court also rejected Stanford's
argument that Inventor Holodniy's assignment to Cetus was voided by the
University's rights to federally-funded inventions under the Bayh-Dole Act (35
U.S.C. § 202(d)):
We are
unconvinced of Stanford's interpretation of the Bayh-Dole Act in this case. Stanford identifies no authorities or reasons why its election of title under
Bayh-Dole had the power to void any prior, otherwise valid assignments of
patent rights. Stanford was entitled to claim whatever rights were still
available after the Government declined to exercise its option, including the
rights of co-inventors Merigan, Katzenstein, and Kozal. However, Holodniy
transferred his rights to Cetus more than six years before Stanford formally
notified the Government of its election of title. As previously noted, Stanford's
invention rights policy "allow[ed] all rights to remain with the inventor
if possible," . . . which supports the conclusion that Holodniy still
possessed rights at the time he signed the VCA with Cetus. Just as we explained
that Bayh-Dole does not automatically void ab initio the inventors' rights in
government-funded inventions, . . . we see no reason why the Act voids prior
contractual transfers of rights.
(However, in footnote 1 the Court noted that "[w]e express no opinion as to whether
Holodniy's execution of the VCA violated any provisions of the Bayh-Dole Act,
or whether the Act provides the Government or Stanford some other legal
recourse to recover Holodniy's rights.")
Because the
Federal Circuit affirmed Roche's rights to the patents-in-suit, Stanford lost
standing to sue under the principle that all co-owners must be joined in an
infringement lawsuit. Despite
Roche's loss of its ability to assert an ownership interest in the patents due
to the actions of the statute of limitations, its rights to the patents
obtained through Inventor Holodniy's assignment agreement were not extinguished
and deprived Stanford of standing to assert infringement against Roche. And because Stanford lacked standing to
bring the suit, the District Court lacked jurisdiction to invalidate the
asserted patents claims for obviousness, which judgment the Federal Circuit also vacated.
While the
outcome is not surprising and indeed is consistent with well-established patent
law principles, wherein rights to an invention arise first in the inventor and can
be freely alienated by the inventor (absent any agreement, such as an employment
agreement, to the contrary), it is clear that this outcome is contrary in
spirit to the intent of the Bayh-Dole regime. It illustrates the necessity for universities to provide
more than merely agreements to be signed by its researchers. Rather, there is a critical need for
information regarding the importance of understanding the interplay of
university and corporate interests in inventions that its researchers may
develop. This is particularly true
for junior researchers like Inventor Holodniy, who no doubt was more interested
in gaining access to the reagents and techniques that would further his
research interests than to any commercial applications of the technology. These are not illegitimate
concerns; indeed, it is preferable
for university researchers to be focused on their primary goal, advancing
knowledge through original research, than on the practical applications of that
research. However, in view of the
different motivations and interests of academia and industry, it behooves
technology transfer office personnel to have the capacity and authority to at
least monitor activities of university research employees when they interact
with or obtain technology owned by corporate sponsors or collaborators. This remains a current problem, and one
whose importance is demonstrated pointedly by Stanford's loss of standing (and
licensing revenue) against Roche in this case.
Board of Trustees of the Leland Stanford Junior
University v. Roche Molecular Systems, Inc. (Fed. Cir. 2009)
Panel: Circuit Judhes Linn, Prost, and Moore
Opinion by Circuit Judge Linn
October 20, 2009 – What the
Patent Docs 